A SIMPLE GUIDE TO CFDS (Contracts For Differences)

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "A SIMPLE GUIDE TO CFDS (Contracts For Differences)"

Transcription

1 A SIMPLE GUIDE TO CFDS (Contracts For Differences)

2 CONTENTS INTRODUCTION 3. INTRODUCTION 4. TERMINOLOGY 5. WHAT IS A CFD 6. ADVANTAGES 8. XTRATA LONG 11. XTRATA TRADE TABLE 12. VODAFONE SHORT 16. RISKS 17. STRATEGIES 18. SUITABILITY 19. CFDs IN SIPPs Contract for Differences (CFDs) were originally designed by a company called Smith New Court in the 1990 s for its hedge fund clients who wanted to short sell the market without having to borrow the stock. Since then demand for CFDs has grown dramatically and now reportedly represents over a third of the LSE s total daily volume. This guide will attempt to explain the key concepts and features of CFDs, the advantages and risks in trading them, the key terminologies and the ways that CFDs can benefit you and your client s portfolios. 3

3 TERMINOLOGY WHAT IS A CFD? Margin A CFD is traded on margin, this means that you do not have to pay the full value of your position you only have to pay a deposit (called margin). This enables the trader to utilize their investable wealth far more efficiently than they would by investing in a pure shares deal. Long and Short Long and Short is simply market terminology for buying and selling the market. When a client is long they have bought at one price in order to profit from selling at a higher one. Conversely, when a client is short they have sold at one price in order to profit by buying back at a lower price. In other words, buy low sell high and sell high buy low. A CFD is simply a contractual agreement between two parties to exchange the difference between the opening and closing price of a financial instrument such as a share. Neither of the parties owns the financial instrument only the contract. Essentially a CFD behaves exactly the like the underlying financial instrument but allows the trader to both go long and short with ease, while the CFD can also amplify returns by using leverage. Leverage Leverage is the term used to describe gaining exposure through the use of borrowings. Clients lever up their equity investment and so control a larger amount of stock. In other words for a small deposit you can borrow the amount you would otherwise have bought. 4 5

4 ADVANTAGES ADVANTAGES The ability to easily go both long and short CFDs have the flexibility to go both long and short. Using regular shares going short is a difficult process and is the domain of sophisticated and professional investors. However, with CFDs traders can go long and short with equal ease. No stamp duty (0.5%) Fidelity s star fund manager Anthony Bolton believes hedge funds have a performance advantage over mutual funds, investment trusts and pension funds. In Bolton s opinion this advantage is the use of CFDs and other equity derivatives which bypass stamp duty. He sees this 0.5% as an impairment to the performance of institutional investors. Clients who invest using CFDs thus have an intrinsic performance advantage over mutual funds and investment trusts. Leverage amplifies returns and risk Leverage magnifies the returns an investor makes, consequently the returns on initial investment can be much higher than if they had invested in the underlying shares. The combination of leverage and lower all round dealing costs enable investors to take a more nimble, active approach to their portfolio. This, along with the ability to go short with ease, means that CFDs are especially useful in volatile and sideways trending markets. Overleaf are two examples of CFD trades, their rationale, their returns and the comparable returns for share trades of the same notional value. Lower dealing costs Commission on CFDs is much lower than on traditional share dealing, often by up to 70%. 6 7

5 XSTRATA LONG A trader has been watching the market and its constituents fall from relative highs at 5600 and on February 10th he checks his indicators and notices that volatility is beginning to decline, which the trader views as a bullish signal, while global macroeconomic fears are also starting to decrease. The trader believes the market will now resume its uptrend following the correction. On 3 rd March Xstrata trades at 1120p and the trader decides to take the profits offered by the market after exceeding his price target. The table overleaf demonstrates the return on investment offered by traditional shares and by CFDs, whilst the table below that illustrates the comparable costs of taking and holding such a position. On a stock specific basis, the trader likes the look of mining giant Xstrata whose share price has fallen, peak-to-trough from 1302p to 985p, fundamentally the trader views the stock as one which will see additional benefits from strong Chinese growth and global metal demand while Xstrata s high beta nature fits perfectly as he believes the trend is now up. The trader selects an entry point at 1000p and a price target of 1100p. 8 9

6 XSTRATA TRADE TABLE 9TH FEBRUARY 2010 SHARE TRADE CFD TRADE 10 On 9th February Xstrata trades 1000p On 9th February Xstrata trades 1000p Account value 50,000 Account value/margin available 5,000 Buy 5000 Buy 5000 shares (using 10x Transaction value 50,000 Notional transaction value 50,000 1% % Stamp duty (0.5%) 0 Stamp duty 0 On 3rd of March 2010 Xstrata price is 1120p Cost comparison - Share trade Vs On 3rd of March 2010 Xstrata price is 1120p Sell 500 Sell 5000 Final transaction value 55,600 Notional transaction value 55,600 Gross profit 5,600 Gross transaction profit 5,600 1% % 167 Financing costs (2.66% x 22 days x 55,600)/ Profit - costs 4,544 Profits - costs 5, Account value 54,544 Account value 10, % Return 9.09% % Return % Cost comparison - CFD trade Cost to buy 5000 Xstrata 50,000 Open a CFD for 5000 Xstrata 5,000 Stamp Duty (0.5%) 250 Stamp Duty (0.5%) Sell 5000 Xstrata 55,600 Close CFD for 5000 Xstrata 55, Financing costs (2.66% x 22 days x 55,600)/ Total costs 1,306 Total costs Capital commitment 50,000 Capital commitment 5,

7 VODAFONE SHORT On March 15th the trader believes that the market has had a strong run from its February lows, and is due for a correction. Given this the trader wishes to short sell either the market or a stock that he feels may have a relatively negative short term outlook. The trader is reluctant to short the most volatile stocks such as the miners as he is betting against the trend and consequently may get stopped out. He feels that mobile network operator Vodafone is poised for a short term pull back. The trader is sure that the market is overvaluing the likelihood of Vodafone s 45% stake in Verizon Wireless producing a dividend, while he also perceives there to be negative newsflow for Vodafone in the future. Combining this with the trader s wider market view he decides to short Vodafone at 152p, with a stop-loss at 156p which would represent a new high for this trend and imply the market has pushed on further. On March 18 th Vodafone trades at 147p, representing a strong short term profit for the trade, which the trader takes. The above trade demonstrates two of the benefits a CFD can provide. The trader, on viewing Vodafone as being short term overvalued, was able to short sell Vodafone and also aims for a much lower price target due to leverage and lower dealing costs. The table overleaf shows the short sale of Vodafone along with a breakdown of the profits and costs

8 VODAFONE SHORT SALE SHORT CFD TRADE On 15th March 2010 the Vodafone price is 152p Account value/margin available 10, Sell 65,000 shares (using 10x Notional transaction value 98,800 SHORT SHARES TRADE Not possible 0.30% On 18th of March Vodafone is Buy 65,000 Notional transaction value 95,550 Gross transaction profit 3, % Financing received (2.66% x 3 days x 55,600)/ Profits + financing received - costs 2, Account value 12,

9 RISKS STRATEGIES The use of leverage amplifies loses as well as gains. Investors can lose more than their initial deposit. An investor s account may approach a point where their losses begin to outweigh the margin on account and they may be required to add additional funds in order to continue trading and fund this paper loss. If the client does not wish to fund the account the position will be sold by the clearing broker at a real loss to the client. Directional trading Typical CFD investors attempt to time the market and often use numerous indicators to call continuations, changes or divergences from trends. These could range from attempting to call or time market tops or bottoms, or a continued strengthening in a given sector or stock. Pairs trading investors may wish to trade in securities that have, historically, behaved in a similar way. These may be two stocks in the same sector whose share prices have diverged, the investor believes that the relationship will revert to its historical mean, so the investor shorts one stock whilst going long the other. Market momentum an investor may perceive a stock to have broken through an established trend line and believe it will now push on to new highs. The investor goes long the CFD and captures further market rises. Scalping The trader attempts to make the spread between the buyers and sellers in the market for a particular stock, a strategy that is very difficult to employ without the added assistance leverage offers with CFDs

10 SUITABILITY CFDs IN SIPPs Although a more efficient product to trade the markets, CFDs are relatively inefficient when investors desire income from their portfolio. This is because the holder of the CFD receives only 90% of the dividend paid by the underlying share. This reduction in dividend received means that investors aiming for an income based portfolio will receive less income from the CFD than they would traditional shares, additionally CFDs are also a relatively short term product so it is unlikely that traders will be in their positions long enough to receive the full dividends. Consequently CFDs are not suitable for investors desiring a high level of income from their portfolio. CFDs can be used effectively in Self Invested Personal Pension Plans. While all the benefits of CFDs still apply, there is also the added benefit of Capital Gains Tax relief when investing within a SIPP. A CFD account can also be used as an effective hedge against current equity investments. Importantly the use of leverage amplifies losses as well as gains; consequently the product is not suitable for clients who do not have a high tolerance for risk. Due to this high level of risk CFDs are only suitable for clients with strong financial market knowledge and equity investment experience

11 1 High Street, Godalming, Surrey GU7 1AZ Tel: Fax: SI Capital is Authorised and Regulated by the Financial Conduct Authority. Member of the London Stock Exchange.

CONTRACTS FOR DIFFERENCE

CONTRACTS FOR DIFFERENCE CONTRACTS FOR DIFFERENCE Cornhill Capital helps private client investors realise significant value in an innovative trading environment. Cornhill Capital Limited is a leading independent investment company

More information

C Evolution General Brochure 1114:C Gen Evolution Broch 0314 24/11/2014 12:22 Page 1 Evolution Strategy

C Evolution General Brochure 1114:C Gen Evolution Broch 0314 24/11/2014 12:22 Page 1 Evolution Strategy Evolution Strategy Introduction to Chryson Chryson is a boutique stockbroking firm, operating from Glasgow. We are regulated by the Financial Conduct Authority, reference 491208, and have been trading

More information

How CFD Trading Works?

How CFD Trading Works? What are CFD s In finance, a contract for difference (CFD) is a contract between two parties, typically described as "buyer" and "seller", stipulating that the seller will pay to the buyer the difference

More information

How do CFDs work? CFD trading is similar to traditional share dealing, with a few exceptions.

How do CFDs work? CFD trading is similar to traditional share dealing, with a few exceptions. What is a CFD? A CFD is an agreement to exchange the difference between the opening and closing prices of the share, index or commodity between the time at which a contract is opened and the time at which

More information

Evolution Strategy. Evolution Highlights. Chryson Evolution Strategy & Performance 2012-2013

Evolution Strategy. Evolution Highlights. Chryson Evolution Strategy & Performance 2012-2013 Evolution Strategy Chryson Evolution Strategy & Performance 20-20 Evolution Highlights Trading with defined strategy Trade CFDs only in FTSE 100 companies Utilising short and long positions Due to the

More information

CFD Trading. You can lose more than your initial investment when trading CFDs

CFD Trading. You can lose more than your initial investment when trading CFDs CFD Trading You can lose more than your initial investment when trading CFDs A ccendo Markets is a market leader in financial trading services*, providing awardwinning on-line and telephone broking services

More information

Trading CFDs with Trader Dealer ABN 17 090 611 680 (AFSL NO 333297)

Trading CFDs with Trader Dealer ABN 17 090 611 680 (AFSL NO 333297) Trading CFDs with Trader Dealer ABN 17 090 611 680 (AFSL NO 333297) Pages 1. Overview 3 2. What is a CFD? 3 3. Why Trade CFDs? 3 4. How Do CFDs Work? 4 4.1 Margin 4 4.2 Commission 5 4.3 Financing 6 4.4

More information

Trading Education. July 2014. The Five Key Elements of CFD Trading. The Five Key Elements of CFD Trading INTRODUCTION

Trading Education. July 2014. The Five Key Elements of CFD Trading. The Five Key Elements of CFD Trading INTRODUCTION READ OUR FULL RISK WARNING. Spread betting, Contracts for Differences (CFDs) & Foreign Exchange (FX) are leveraged products & carry a high level of risk to your capital as prices might move rapidly against

More information

In effect CFD s are financial derivatives, originally known as Traded Options, that allow traders to take advantage of prices moving up (long

In effect CFD s are financial derivatives, originally known as Traded Options, that allow traders to take advantage of prices moving up (long What are CFD s In finance, a contract for difference (CFD) is a contract between two parties, typically described as "buyer" and "seller", stipulating that the seller will pay to the buyer the difference

More information

CommSeC CFDS: IntroDuCtIon to FX

CommSeC CFDS: IntroDuCtIon to FX CommSec CFDs: Introduction to FX Important Information This brochure has been prepared without taking account of the objectives, financial and taxation situation or needs of any particular individual.

More information

A guide to CFDs. Contracts for difference. For more information please contact us on 0117 988 9915 or visit our website www.hlmarkets.co.

A guide to CFDs. Contracts for difference. For more information please contact us on 0117 988 9915 or visit our website www.hlmarkets.co. A guide to CFDs Contracts for difference For more information please contact us on 0117 988 9915 or visit our website www.hlmarkets.co.uk One College Square South, Anchor Road, Bristol, BS1 5HL www.hl.co.uk

More information

Guide to Contracts for Difference (CFDs)

Guide to Contracts for Difference (CFDs) Guide to Contracts for Difference (CFDs) www.templetonsecurities.com What are CFDs? How do CFDs work? A CFD (Contract for Difference) is an arrangement made in a futures contract whereby differences in

More information

Beginner s Guide to CFDs

Beginner s Guide to CFDs Beginner s Guide to CFDs Chapters 1.1-1.3 www.trader.ge CFDs Chapter 1.1 / A Basic Description Welcome to this chapter, which will give a brief introduction to the history of CFDs. If you are already familiar

More information

Guide to Contracts for Difference (CFDs)

Guide to Contracts for Difference (CFDs) Guide to Contracts for Difference (CFDs) www.templetonsecurities.com What are CFDs? A CFD (Contract for Difference) is an arrangement made in a futures contract whereby differences in settlement are made

More information

offering a comprehensive range of investment products and services.

offering a comprehensive range of investment products and services. Linear Investments is a global investment manager offering comprehensive range of Investments is aaglobal investment manager investment products and services Linear offering a comprehensive range of investment

More information

CONTRACTS FOR DIFFERENCE

CONTRACTS FOR DIFFERENCE CONTRACTS FOR DIFFERENCE Contracts for Difference (CFD s) were originally developed in the early 1990s in London by UBS WARBURG. Based on equity swaps, they had the benefit of being traded on margin. They

More information

Spread Bet & CFD Options Reference Sheet

Spread Bet & CFD Options Reference Sheet Spread Bet & CFD Options Reference Sheet What are options? There are two types of options: calls and puts. Call option: The buyer of the call option has the right (but not the obligation) to buy an agreed

More information

INDUSTRY LEADING DERIVATIVES EXPERTS. www.insightcapitalstrategies.com Tel: 0141 375 1246

INDUSTRY LEADING DERIVATIVES EXPERTS. www.insightcapitalstrategies.com Tel: 0141 375 1246 INDUSTRY LEADING DERIVATIVES EXPERTS www.insightcapitalstrategies.com Tel: 0141 375 1246 Insight specialises in generating tax-free capital growth by investing client funds using spread betting platforms

More information

Margin and Exposure 14878.0351 348939.487 34598.6325 66875.0449

Margin and Exposure 14878.0351 348939.487 34598.6325 66875.0449 14878.0351 348939.487 34598.6325 66875.0449 34838.0371 34898.5321 94898.6327 54798.0321 44898.0324 54695.3522 96898.0321 24848.6323 44898.0321 34898.0328 14878.0351 348939.487 34598.6325 66875.0449 34838.0371

More information

Risk Disclosure RISK DISCLOSURE

Risk Disclosure RISK DISCLOSURE RISK DISCLOSURE RISK DISCLOSURE IronFX Global UK Limited ("IronFX UK" or the Company ) is authorized and regulated by the Financial Conduct Authority ( FCA formerly the FSA) under Registration No 585561,

More information

IntroductIon to commsec cfds

IntroductIon to commsec cfds Introduction to CommSec CFDs Important Information This brochure has been prepared without taking account of the objectives, financial and taxation situation or needs of any particular individual. Because

More information

Short and Leverage ETPs MAKE MORE OF COMMODITIES

Short and Leverage ETPs MAKE MORE OF COMMODITIES May 2015 LISTED PRODUCTS Short and Leverage ETPs MAKE MORE OF COMMODITIES THIS COMMUNICATION IS DIRECTED AT SOPHISTICATED RETAIL CLIENTS IN THE UK Contents 3 KEY TERMS YOU WILL COME ACROSS IN THIS BROCHURE

More information

Chapter 2.3. Technical Analysis: Technical Indicators

Chapter 2.3. Technical Analysis: Technical Indicators Chapter 2.3 Technical Analysis: Technical Indicators 0 TECHNICAL ANALYSIS: TECHNICAL INDICATORS Charts always have a story to tell. However, from time to time those charts may be speaking a language you

More information

WHERE EXPERIENCE COUNTS

WHERE EXPERIENCE COUNTS Investment Services Guide Retail & Corporate Stockbrokers WHERE EXPERIENCE COUNTS Our Advisory Investment Services are designed specifically for investors seeking specialist expertise and advice on investments

More information

Margin Requirements & Margin Calls

Margin Requirements & Margin Calls Margin Requirements & Margin Calls Dr. Patrick Toche References : Zvi Bodie, Alex Kane, Alan J. Marcus. Essentials of Investment. McGraw- Hill Irwin. Chapter 3 of the Bodie-Kane-Marcus textbook will be

More information

Risks of Investments explained

Risks of Investments explained Risks of Investments explained Member of the London Stock Exchange .Introduction Killik & Co is committed to developing a clear and shared understanding of risk with its clients. The categories of risk

More information

6. Get Top Trading Signals with the RSI

6. Get Top Trading Signals with the RSI INTERMEDIATE 6. Get Top Trading Signals with the RSI The Relative Strength Index, or RSI, is one of the most popular momentum indicators in technical analysis. The RSI is an oscillator that moves between

More information

General Risk Disclosure

General Risk Disclosure General Risk Disclosure Colmex Pro Ltd (hereinafter called the Company ) is an Investment Firm regulated by the Cyprus Securities and Exchange Commission (license number 123/10). This notice is provided

More information

CONTRACT FOR DIFFERENCE

CONTRACT FOR DIFFERENCE CONTRACT FOR DIFFERENCE Units 1D, 1E and 1F Surrey Office Park 330 Surrey Avenue Ferndale, Randburg South Africa Phone: 011 568 1548 Phone: 011 781 2342 Fax: 086 597 2284 Email: info@jvnassetmanagement.co.za

More information

www.ifcmarkets.com tutorial

www.ifcmarkets.com tutorial tutorial Introduction Chapter 1: THE BASICS YOU SHOULD KNOW ABOUT CFD TRADING Chapter 2: CHOOSE YOUR CFD PROVIDER Chapter 3: TRADING IN ACTION Chapter 4: CONSIDER AND MANAGE YOUR RISKS INTRODUCTION Nowadays,

More information

Margin Requirements & Margin Calls

Margin Requirements & Margin Calls Margin Requirements & Margin Calls Dr. Patrick Toche References : Zvi Bodie, Alex Kane, Alan J. Marcus. Essentials of Investment. McGraw- Hill Irwin. Chapter 3 of the Bodie-Kane-Marcus textbook will be

More information

Mastering the Markets

Mastering the Markets www.mastermindtraders.com Presents Mastering the Markets Your Path to Financial Freedom DISCLAIMER Neither MasterMind Traders or any of its personnel are registered broker-dealers or investment advisors.

More information

6 year investment. 5x the rise of the FTSE 100 Index. Maximum gross return at maturity of 60%

6 year investment. 5x the rise of the FTSE 100 Index. Maximum gross return at maturity of 60% JUNE 2014 LISTED PRODUCTS UK Accelerated Tracker 5 Enhanced exposure to the FTSE 100 INDEX 6 year investment 5x the rise of the FTSE 100 Index Maximum gross return at maturity of 60% Capital is fully at

More information

PROFUNDS GROUP INVESTOR EDUCATION GUIDE 1 GEARED INVESTING. An introduction to leveraged and inverse funds

PROFUNDS GROUP INVESTOR EDUCATION GUIDE 1 GEARED INVESTING. An introduction to leveraged and inverse funds PROFUNDS GROUP INVESTOR EDUCATION GUIDE 1 GEARED INVESTING An introduction to leveraged and inverse funds GEARED FUNDS have generated a great deal of interest in recent years. Also known as LEVERAGED AND

More information

Introduction to Equity Derivatives on Nasdaq Dubai NOT TO BE DISTRIUTED TO THIRD PARTIES WITHOUT NASDAQ DUBAI S WRITTEN CONSENT

Introduction to Equity Derivatives on Nasdaq Dubai NOT TO BE DISTRIUTED TO THIRD PARTIES WITHOUT NASDAQ DUBAI S WRITTEN CONSENT Introduction to Equity Derivatives on Nasdaq Dubai NOT TO BE DISTRIUTED TO THIRD PARTIES WITHOUT NASDAQ DUBAI S WRITTEN CONSENT CONTENTS An Exchange with Credentials (Page 3) Introduction to Derivatives¬Ľ

More information

SAVI TRADING 2 KEY TERMS AND TYPES OF ORDERS. SaviTrading LLP 2013

SAVI TRADING 2 KEY TERMS AND TYPES OF ORDERS. SaviTrading LLP 2013 SAVI TRADING 2 KEY TERMS AND TYPES OF ORDERS 1 SaviTrading LLP 2013 2.1.1 Key terms and definitions We will now explain and define the key terms that you are likely come across during your trading careerbefore

More information

Risk Warning Notice for Contracts for Difference ( CFDs ) and Spot Foreign Exchange ( Forex )

Risk Warning Notice for Contracts for Difference ( CFDs ) and Spot Foreign Exchange ( Forex ) Risk Warning Notice for Contracts for Difference ( CFDs ) and Spot Foreign Exchange ( Forex ) 1. INTRODUCTION 1.1. TradingForex.com is a domain owned and operated by TTCM Traders Trust Capital Markets

More information

Welcome to Spread Co. Trading the markets with Spread Co

Welcome to Spread Co. Trading the markets with Spread Co Welcome to Spread Co. Trading the markets with Spread Co 1 1 Welcome to Spread Co I founded Spread Co in 2006 with the vision to bring a custom built, professional trading platform to financial traders

More information

Leverage. Chapter 1 LEVERAGE. In this chapter, you will be able to:

Leverage. Chapter 1 LEVERAGE. In this chapter, you will be able to: Chapter 1 Leverage In this chapter, you will be able to: Understand how traders magnify their profits with leverage Understand how to profit from the market when it is declining by short selling Identify

More information

11 Option. Payoffs and Option Strategies. Answers to Questions and Problems

11 Option. Payoffs and Option Strategies. Answers to Questions and Problems 11 Option Payoffs and Option Strategies Answers to Questions and Problems 1. Consider a call option with an exercise price of $80 and a cost of $5. Graph the profits and losses at expiration for various

More information

Contents. 2 What are Options? 3 Ways to use Options. 7 Getting started. 8 Frequently asked questions. 13 Contact us. 14 Important Information

Contents. 2 What are Options? 3 Ways to use Options. 7 Getting started. 8 Frequently asked questions. 13 Contact us. 14 Important Information Options For individuals, companies, trusts and SMSFs The Options and Lending Facility Contents 2 What are Options? 3 Ways to use Options 7 Getting started 8 Frequently asked questions 13 Contact us 14

More information

What is stock? What drives stock prices? To introduce what Stock Index CFD is, we d like to introduce to you what stock. trading is first.

What is stock? What drives stock prices? To introduce what Stock Index CFD is, we d like to introduce to you what stock. trading is first. To introduce what Stock Index CFD is, we d like to introduce to you what stock trading is first. What is stock? our private enterprise system. They spur job creation and economic growth while creating

More information

BEAR: A person who believes that the price of a particular security or the market as a whole will go lower.

BEAR: A person who believes that the price of a particular security or the market as a whole will go lower. Trading Terms ARBITRAGE: The simultaneous purchase and sale of identical or equivalent financial instruments in order to benefit from a discrepancy in their price relationship. More generally, it refers

More information

1300 307 853 cfds@commsec.com.au commsec.com.au. Important Information

1300 307 853 cfds@commsec.com.au commsec.com.au. Important Information CommSec CFDs: Introduction to Indices We re here to help To find out more, call us on 1300 307 853, from 8am Monday to 6am Saturday, email us at cfds@commsec.com.au or visit our website at commsec.com.au.

More information

Risk Disclosure Statement for CFDs on Securities, Indices and Futures

Risk Disclosure Statement for CFDs on Securities, Indices and Futures Risk Disclosure on Securities, Indices and Futures RISK DISCLOSURE STATEMENT FOR CFDS ON SECURITIES, INDICES AND FUTURES This disclosure statement discusses the characteristics and risks of contracts for

More information

INDEPENDENT. OBJECTIVE. RELIABLE. Options Basics & Essentials: The Beginners Guide to Trading Gold & Silver Options

INDEPENDENT. OBJECTIVE. RELIABLE. Options Basics & Essentials: The Beginners Guide to Trading Gold & Silver Options INDEPENDENT. OBJECTIVE. RELIABLE. 1 About the ebook Creator Drew Rathgeber is a senior broker at Daniels Trading. He has been heavily involved in numerous facets of the silver & gold community for over

More information

Chapter 2.3. Technical Indicators

Chapter 2.3. Technical Indicators 1 Chapter 2.3 Technical Indicators 0 TECHNICAL ANALYSIS: TECHNICAL INDICATORS Charts always have a story to tell. However, sometimes those charts may be speaking a language you do not understand and you

More information

Options CHAPTER 7 INTRODUCTION OPTION CLASSIFICATION

Options CHAPTER 7 INTRODUCTION OPTION CLASSIFICATION CHAPTER 7 Options INTRODUCTION An option is a contract between two parties that determines the time and price at which a stock may be bought or sold. The two parties to the contract are the buyer and the

More information

COVERED WARRANTS HOW TO TRADE. www.sglistedproducts.co.uk NOVEMBER 2014 LISTED PRODUCTS

COVERED WARRANTS HOW TO TRADE. www.sglistedproducts.co.uk NOVEMBER 2014 LISTED PRODUCTS NOVEMBER 2014 LISTED PRODUCTS COVERED WARRANTS HOW TO TRADE Covered warrants are products suitable for professional clients and sophisticated retail clients in the UK who have a good understanding of the

More information

Contracts for Difference. Andrew Wilkinson

Contracts for Difference. Andrew Wilkinson Contracts for Difference Andrew Wilkinson Disclaimer CFD trading of UK FTSE listed stocks is available through Interactive Brokers (U.K.) Limited. Trading of other products such as stocks, options, Australian

More information

Chapter 1.3. Technical Analysis: Trends, Support and Resistance

Chapter 1.3. Technical Analysis: Trends, Support and Resistance 1 Chapter 1.3 Technical Analysis: Trends, Support and Resistance 0 Contents TECHNICAL ANALYSIS: TRENDS, SUPPORT AND RESISTANCE Stocks are rising. Stocks are falling. If you watch or read financial news

More information

Hargreaves Lansdown Spread Betting/ Hargreaves Lansdown CFDs Trade & Order Execution Policy

Hargreaves Lansdown Spread Betting/ Hargreaves Lansdown CFDs Trade & Order Execution Policy / Hargreaves Lansdown CFDs Trade & Order Execution Policy Effective from: 1st November 2007 www.hlmarkets.co.uk Telephone: 0117 988 9915 1 Trade & Order Execution Policy 1. Introduction This policy explains

More information

Chapter 8. Trading using multiple time-frames

Chapter 8. Trading using multiple time-frames Chapter 8 Trading using multiple time-frames TRADING USING MULTIPLE TIME- FRAMES Stock markets worldwide function because, at any given time, some traders want to buy whilst others want to sell. A trader

More information

Homework Margin Purchases. Dr. Patrick Toche

Homework Margin Purchases. Dr. Patrick Toche Homework Margin Purchases Dr. Patrick Toche A dagger indicates a possibly more challenging question. Maintenance Margin 1. You are bullish on Telecom stock. The current market price is $50 per share, and

More information

THE POWER OF FOREX OPTIONS

THE POWER OF FOREX OPTIONS THE POWER OF FOREX OPTIONS TOPICS COVERED Option basics Call options Put Options Why trade options? Covered call Covered put Hedging your position using options How to repair a trading position THE POWER

More information

Answers to Concepts in Review

Answers to Concepts in Review Answers to Concepts in Review 1. (a) In the money market, short-term securities such as CDs, T-bills, and banker s acceptances are traded. Long-term securities such as stocks and bonds are traded in the

More information

Trading Education. July 2014. The Art of Short-Term Trading the FTSE 100 Index. The Art of Short Term Trading the FTSE 100 Index

Trading Education. July 2014. The Art of Short-Term Trading the FTSE 100 Index. The Art of Short Term Trading the FTSE 100 Index READ OUR FULL RISK WARNING. Spread betting, Contracts for Differences (CFDs) & Foreign Exchange (FX) are leveraged products & carry a high level of risk to your capital as prices might move rapidly against

More information

CFDs An Introduction

CFDs An Introduction CFDs An Introduction Seminar Overview Who is Shorcan Index Introduction of CFDs (Contracts for Difference) Description and Benefits Examples Questions Who is Shorcan Index? Shorcan Index, is part of the

More information

Module 5 Index CFDs. Course #: Title. Version 1 August 2013 1

Module 5 Index CFDs. Course #: Title. Version 1 August 2013 1 Module 5 Index CFDs Course #: Title Topic 1: S&P/ASX 200 CFDs... 3 Initial margin... 3 Variation margins... 3 Cashflows... 4 Topic 2: S&P/ASX 200 CFD strategies... 6 Trade broad market movements... 6 Protect

More information

Investments I HW 2 - Solutions

Investments I HW 2 - Solutions Investments I HW 2 - Solutions Sailesh Tiwari 26 September, 2008 Problem 1 (BKM Ch3. Ques.3) (a) The Trader buys 300 Internet Dreams shares at $40 per share. Total cost of the shares is 300 $40 = $12000.

More information

Strategic Research: Contracts For Difference

Strategic Research: Contracts For Difference Strategic Research: Contracts For Difference Ian Littlewood Contracts For Difference April 2007 Strategic Research reports from Thomson Financial are designed to enable strategic decision-making for investor

More information

Module 1 Introduction Programme

Module 1 Introduction Programme Module 1 Introduction Programme CFDs: overview and trading online Introduction programme, October 2012, edition 18 1 In this module we look at the basics: what CFDs are and how they work. We look at some

More information

Macquarie Contracts for Difference

Macquarie Contracts for Difference Macquarie Contracts for Difference Product Disclosure Statement 15 JUNE 2015 Macquarie Bank Limited. ABN 46 008 583 542. Australian Financial Services Licence No. 237502. 1 This PDS This product disclosure

More information

There are two types of options - calls and puts.

There are two types of options - calls and puts. Options on Single Stock Futures Overview Options on single Stock Futures An SSF option is, very simply, an instrument that conveys to its holder the right, but not the obligation, to buy or sell an SSF

More information

Investments GUIDE TO FUND RISKS

Investments GUIDE TO FUND RISKS Investments GUIDE TO FUND RISKS CONTENTS Making sense of risk 3 General risks 5 Fund specific risks 6 Useful definitions 9 2 MAKING SENSE OF RISK Understanding all the risks involved when selecting an

More information

Thinking of trading contracts for difference (CFDs)?

Thinking of trading contracts for difference (CFDs)? Thinking of trading contracts for difference (CFDs)? This guide from the Australian Securities and Investments Commission (ASIC) can help you assess the risks of CFDs. How this booklet can help you This

More information

How to Trade Almost Any Asset in the World from a Single Account Using CFDs

How to Trade Almost Any Asset in the World from a Single Account Using CFDs How to Trade Almost Any Asset in the World from a Single Account Using CFDs How to Trade Almost Any Asset in the World from a Single Account Using CFDs Shae Russell, Editor INTRODUCTION TO TRADING CFDS

More information

Module 1 Introduction to CFDs

Module 1 Introduction to CFDs Module 1 Introduction to CFDs Course #: Title Topic 1: Why use CFDs?... 3 Introduction... 3 Leveraged exposure... 3 Trade rising or falling markets... 3 Protect a physical position... 4 Pairs trading...

More information

Understanding Leveraged Exchange Traded Funds AN EXPLORATION OF THE RISKS & BENEFITS

Understanding Leveraged Exchange Traded Funds AN EXPLORATION OF THE RISKS & BENEFITS Understanding Leveraged Exchange Traded Funds AN EXPLORATION OF THE RISKS & BENEFITS Direxion Shares Leveraged Exchange-Traded Funds (ETFs) are daily funds that provide 200% or 300% leverage and the ability

More information

CommSeC CFDS: IntroDuCtIon to CommoDItIeS

CommSeC CFDS: IntroDuCtIon to CommoDItIeS CommSec CFDs: Introduction to Commodities We re here to help To find out more, call us on 1300 307 853, from 8am Monday to 6am Saturday, email us at cfds@commsec.com.au or visit our website at commsec.com.au.

More information

An Introduction to Contracts for Difference

An Introduction to Contracts for Difference An Introduction to Contracts for Difference By: David Patten Director and Compliance Officer City Credit Capital (UK) Ltd. Email: david@cccapital cccapital.co..co.uk Building Labuan Today, Asia accounts

More information

CFD Options Trade and Margin Examples

CFD Options Trade and Margin Examples CFD Options Trade and Margin Examples Example Trades Buying a call Market: UK 100 (current price 6330) View: UK 100 to rise before mid June. Instrument: UK100 Jun Call 6600 (current price 30) Position:

More information

Forex Capital Trading Pty Ltd. does not make any recommendations on the validity of any financial product referred to in this advertisement, emails

Forex Capital Trading Pty Ltd. does not make any recommendations on the validity of any financial product referred to in this advertisement, emails Forex Capital Trading Pty Ltd. does not make any recommendations on the validity of any financial product referred to in this advertisement, emails or its related websites and the information enclosed

More information

Swing Trade Warrior Chapter 1. Introduction to swing trading and how to understand and use options How does Swing Trading Work? The idea behind swing trading is to capitalize on short term moves of stocks

More information

Options Strategy for Professional Clients

Options Strategy for Professional Clients Options Strategy for Professional Clients Optimise is an options strategy which uses market volatility selling FTSE100 cash settled options contracts. Premium is taken from the market on options that are

More information

Macquarie Prime Facility CFD Questionnaire

Macquarie Prime Facility CFD Questionnaire Macquarie Prime Facility CFD Questionnaire This form only needs to be completed you are applying for a CFD account. Please note that all account signatories must sign this form. In order for Macquarie

More information

RISK DISCLOSURE DOCUMENT

RISK DISCLOSURE DOCUMENT RISK DISCLOSURE DOCUMENT Version 1.0 : June,25 th,2015 Copyright IBA Markets 2015. All Rights Reserved RISK DISCLOSURE International Brokers Association Markets, a brand of SIR GLOBAL LTD (the Company

More information

Everything You Need to Know About CFDs

Everything You Need to Know About CFDs Everything You Need to Know About CFDs Contracts for Difference, or CFDs, have been used for more than 20 years, but did not become popular with retail traders until after 2000. Essentially, a CFD is a

More information

Contracts for Difference (CFDs)

Contracts for Difference (CFDs) Contract for Difference (CFDs) and FCA Disclosure Requirements What are Contract for Difference (CFDs) CFDs (also known as Synthetic Equity Swaps (SES)) are Over the Counter (OTC) transactions which allow

More information

What is the minimum adhoc contribution? There are no minimums. Clients can setup direct debits however they should wish to invest regularly.

What is the minimum adhoc contribution? There are no minimums. Clients can setup direct debits however they should wish to invest regularly. What is the minimum investment? Is there a maximum investment? The minimum investment in the fund is set at R10, 000 with no maximum threshold applicable. We would ordinarily say that a first initial investment

More information

Exchange-Traded Funds

Exchange-Traded Funds Exchange-Traded Funds Exchange Traded Funds (ETF s) are becoming popular investment vehicles for many investors. Most ETF s are cost effective, broad market funds. We have put together a layman s explanation

More information

CHAPTER 3: ANSWERS OF HOW SECURITIES ARE TRADED

CHAPTER 3: ANSWERS OF HOW SECURITIES ARE TRADED CHAPTER 3: ANSWERS OF HOW SECURITIES ARE TRADED PROBLEM SETS 1. Answers to this problem will vary. 2. The dealer sets the bid and asked price. Spreads should be higher on inactively traded stocks and lower

More information

Exchange Traded Funds

Exchange Traded Funds LPL FINANCIAL RESEARCH Exchange Traded Funds February 16, 2012 What They Are, What Sets Them Apart, and What to Consider When Choosing Them Overview 1. What is an ETF? 2. What Sets Them Apart? 3. How Are

More information

Beginner s Guide to CFDs

Beginner s Guide to CFDs Saxo Academy Beginner s Guide to CFDs Chapters 1.1-1.3 academy.tradingfloor.com CFDs Chapter 1.1 / A Basic Description Welcome to this chapter, which will give a brief introduction to the history of CFDs.

More information

A guide to Financial Spread Betting

A guide to Financial Spread Betting A guide to Financial Spread Betting For more information please contact us on 0117 988 9915 or visit our website www.hlmarkets.co.uk One College Square South, Anchor Road, Bristol, BS1 5HL www.hl.co.uk

More information

Due Diligence Report. Physical Gold Ltd. 2013 PHYSICAL GOLD LTD. GOLD INVESTMENT OPPORTUNITIES

Due Diligence Report. Physical Gold Ltd. 2013 PHYSICAL GOLD LTD. GOLD INVESTMENT OPPORTUNITIES Due Diligence Report Physical Gold Ltd. 2013 Introduction PGL are offering investors the opportunity to purchase and own physical gold, there is no pooling of assets and investors will receive proof of

More information

General Forex Glossary

General Forex Glossary General Forex Glossary A ADR American Depository Receipt Arbitrage The simultaneous buying and selling of a security at two different prices in two different markets, with the aim of creating profits without

More information

Investment Analysis (FIN 383) Fall 2009. Homework 2

Investment Analysis (FIN 383) Fall 2009. Homework 2 Investment Analysis (FIN 383) Fall 2009 Homework 2 Instructions: please read carefully You should show your work how to get the answer for each calculation question to get full credit The due date is Thu,

More information

Chapter 1.1. The Stock and CFD Market

Chapter 1.1. The Stock and CFD Market 1 Chapter 1.1 The Stock and CFD Market 0 THE STOCK AND CFD MARKETS The global financial markets have never been so vibrant and alive, and they have never been so accessible to you as an individual investor.

More information

A guide to INVESTMENT TRUSTS. We ve been investing successfully since 1888. We re on the right course to invest for generations.

A guide to INVESTMENT TRUSTS. We ve been investing successfully since 1888. We re on the right course to invest for generations. A guide to INVESTMENT TRUSTS We ve been investing successfully since 1888. We re on the right course to invest for generations. 2 A guide to Investment Trusts Contents 3 Investment Trusts explained 4 Differences

More information

SHORT AND LEVERAGE ETPs MAKE MORE OF YOUR TRADING DAY

SHORT AND LEVERAGE ETPs MAKE MORE OF YOUR TRADING DAY AUGUST 2015 LISTED PRODUCTS SHORT AND LEVERAGE ETPs MAKE MORE OF YOUR TRADING DAY THIS COMMUNICATION IS DIRECTED AT SOPHISTICATED RETAIL CLIENTS IN THE UK CONTENTS 3 KEY TERMS YOU WILL COME ACROSS IN THIS

More information

A selection of hedge fund account offerings available to both retail and professional investors

A selection of hedge fund account offerings available to both retail and professional investors A selection of hedge fund account offerings available to both retail and professional investors Titan Investment Partners was founded in 2012 in response to a gap within both the fund management & spread

More information

XIV. Additional risk information on forward transactions in CFDs

XIV. Additional risk information on forward transactions in CFDs XIV. Additional risk information on forward transactions in CFDs The following information is given in addition to the general risks associated with forward transactions. Please read the following information

More information

CFDs YOUR STARTER KIT

CFDs YOUR STARTER KIT CFDs YOUR STARTER KIT Risk Warning: Forex and CFDs are leveraged products and you may lose your initial deposit as well as substantial amounts of your investment. Trading leveraged products carries a high

More information

Derivative Users Traders of derivatives can be categorized as hedgers, speculators, or arbitrageurs.

Derivative Users Traders of derivatives can be categorized as hedgers, speculators, or arbitrageurs. OPTIONS THEORY Introduction The Financial Manager must be knowledgeable about derivatives in order to manage the price risk inherent in financial transactions. Price risk refers to the possibility of loss

More information

Answers to Concepts in Review

Answers to Concepts in Review Answers to Concepts in Review 1. Puts and calls are negotiable options issued in bearer form that allow the holder to sell (put) or buy (call) a stipulated amount of a specific security/financial asset,

More information

CHAPTER 22: FUTURES MARKETS

CHAPTER 22: FUTURES MARKETS CHAPTER 22: FUTURES MARKETS 1. a. The closing price for the spot index was 1329.78. The dollar value of stocks is thus $250 1329.78 = $332,445. The closing futures price for the March contract was 1364.00,

More information

RISK DISCLOSURE STATEMENT

RISK DISCLOSURE STATEMENT RISK DISCLOSURE STATEMENT IMPORTANT NOTICE Certain financial instruments referred to in this document may not be eligible for marketing, sale or promotion in the United States of America and some other

More information

5 CFD. Trading Mistakes That Spell Disaster. Contracts for Difference

5 CFD. Trading Mistakes That Spell Disaster. Contracts for Difference 5 CFD Trading Mistakes That Spell Disaster Contracts for Difference Page 2 5 CFD Trading Mistakes That Spell Disaster Everyone makes them, most traders have probably been told by someone how to avoid making

More information